Case Summaries 12/2011
(court grants motion of U.S. government (IRS) for ability to serve "John Doe" summons on California State Board of Equalization to obtain names of CA residents who transferred property to family members from 2005-2010; IRS is attempting to ensure that gift tax returns are filed when required; state of CA had claimed that state law prohibited the state from disclosing such information without court approved summons; IRS has already received information about intra-family property transfers from county or state officials in CT, FL, HI, NE, NH, NJ, NY, NC, OH, PA, TN, TX, VA WA and WI).
(plaintiff, activist group that promotes vegan diet and animal rights, sued defendants to force federal government to replace MyPyramid food diagram with different (plant-based) dietary guidelines that line-up with plaintiff's beliefs; defendants did not respond and court dismissed complaint for failure to state an injury; plaintiff claimed that defendants' guidelines did not identify foods that consumers should consume less of and interferes with plaintiff's efforts to improve health and well-being; in dismissing case, court stated that plaintiff "fails to provide any support, however, for this alleged injury, which is based in whole on conjecture and speculation.")
(scrivener mistakenly included power in residuary trust in decedent’s will that gave surviving spouse the ability to appoint principal to any persons, including surviving spouse’s estate; scrivener stated that provision should have stated, “Spouse could appoint the principal in whatever manner she desires, except not to herself, her estate, or the creditors of her estate”; surviving spouse filed court petition to reform residuary trust to correct scrivener’s error and court granted petition for reformation; reformation consistent with state law and did not constitute general power of appointment under I.R.C. §2041(b) and reformation did not constitute exercise or release of general power of appointment under I.R.C. §2514(b) so as to constitute a gift by the decedent).
(taxpayer, C corporation on accrual method, requested consent to revoke first-year bonus depreciation election that was inadvertently made; revocation permitted to revoke election within 60 days of date of letter).
(court upholds bankruptcy court's denial of debtor's discharge due to debtor's making of false statements on financial disclosure and omitting existence of livestock business, gross income from livestock business, other income, transfers of certain assets and co-ownership of vehicle with wife; debtor claimed that he misread questions on Statement of Financial Affairs document and was not trying to mislead and claimed that he didn't list his farming business because it was "like hobby farming" for him; as to asset transfers, debtor claimed that assets were not collateral but didn't provide copy of security agreement and did not rebut finding that bank had security interest; do not be dischargeable under 11 U.S.C. Sec. 727(a)(4)(A), false statement must be both material and made with intent; requirements satisfied; discharge denied).
(Agricultural Marketing Agreement Act (AMAA) does not preclude judicial review of almond producers' challenge to almond marketing order; producers have standing to challenge order).
(plaintiff determined to not have right of first refusal to buy land from decedent's estate after seller died in 2006; 1972 deed gave plaintiff a right of first refusal to buy subject property that stated, if "the seller would elect to sell remaining part of this farm, purchaser to have first refusal", and that the option was "not to be construed as a covenant running with the land, but may only be exercised by the signatorys [sic] to this agreement"; court determined that right of first refusal personal in nature and only exercisable if the seller, and not the seller's estate, desired to sell the subject property to a third party).
(oil and gas lease found to have terminated by its terms due to “unless” clause in lease; plaintiff entitled to statutory damages, costs and fees; lease specified that lease would terminate 120 business days from date of “notarized signature” unless defendant paid or tendered $45 per net mineral acre as a “supplemental bonus payment” before the termination date; lease executed and notarized on Jul. 20, 2009, but payment of sight draft required further authorization by defendant which defendant did not give; revised lease sent to plaintiff on Jan. 6, 2010 stating that plaintiff owned 3.68 fewer mineral acres than the amount covered in the original lease and extending term or original lease by six months; revised lease not executed and second sight draft not presented for payment; “unless” clause did not state condition subsequent upon which lease may be forfeited, but is construed as clause of special limitation; lease terminated automatically upon non-payment of bonus without need for any notice or demand on lessor’s part).
(oil and gas lease found to have terminated by its terms due to “unless” clause in lease; plaintiff entitled to statutory damages, costs and fees; lease specified that lease would terminate 120 business days from date of “notarized signature” unless defendant paid or tendered $45 per net mineral acre as a “supplemental bonus payment” before the termination date; lease executed and notarized on Jul. 20, 2009, but payment of sight draft required further authorization by defendant which defendant did not give; revised lease sent to plaintiff on Jan. 6, 2010 stating that plaintiff owned 3.68 fewer mineral acres than the amount covered in the original lease and extending term or original lease by six months; revised lease not executed and second sight draft not presented for payment; “unless” clause did not state condition subsequent upon which lease may be forfeited, but is construed as clause of special limitation; lease terminated automatically upon non-payment of bonus without need for any notice or demand on lessor’s part).
(on a bi-partisan 234-193 vote, U.S. House passed H.R. 3630 which extends through 2012 the 2 percentage point cut in employee Social Security taxes and 100 percent bonus depreciation; bill contains cuts in government spending as offsets, including a change in the threshold for recapturing the I.R.C. Sec. 36B healthcare credit overpayment and requiring taxpayers claiming the refundable child tax credit to provide their Social Security numbers on tax return; bill also includes pay freeze for federal workers through 2013; bill also contains provision requiring the White House to make a decision on the Keystone XL oil pipeline).
(cost of cell towers fixed to land or to buildings are 15-year MACRS property and 20-year ADS property; cell towers are inherently permanent structures and are not personal property).
(buyer of land bought tract subject to annual assessments; such assessments ran with the land under state (PA) law; buyer must pay assessments even though buyer not signatory to declaration of restrictions; declaration recorded and provided for obligation to pay annual assessments).
(township, rather than municipality, was decedent's domicile for state estate tax purposes with respect to decedent's intangible personal property because evidence showed that decedent had intent to abandon domicile in municipality and establish domicile in township; decedent's only activity in municipality related to antique-collecting business).
(plaintiff injured upon entering pasture when butted by ram; plaintiff was on premises for purpose of taking photos to help in marketing property for sale; plaintiff sued in negligence, premises liability, strict liability for injury caused by dangerous animal and strict liability for injury caused by naturally dangerous animal; trial court ruled that defendant (property manager) entitled to judgment as a matter of law; on appeal, court reversed on basis that defendant could not show that plaintiff could not produce evidence that defendant had duty to warn plaintiff about the ram; burden of proof did not shift to plaintiff to establish evidence that summary judgment should not have been granted; defendant did not produce affirmative evidence that plaintiff would be unable to prove defendant had duty to warn plaintiff of ram's dangerous propensities).
(exercise of stock options and resulting receipt of stock occurred in connection with performance of petitioner's services to company and is includible in petitioner's income; value of stock generated taxable deduction to company).
(plaintiff, steel mill, won judgment in state court for condemnation, but federal court claim for compensation denied because state (PA) law did not provide for compensation; on further review, court noted that plaintiff clearly noted intention to split state and federal claims during state action so claim not precluded; taking involved per se taking and takings claim accrued when state supreme court denied review in second state action, so claim timely; federal trial court's judgment reversed and case remanded).
(plaintiff challenges defendant's determination that two reaches or river were navigable waters of the U.S. and regulable as such under the CWA; trial court dismissed the case for lack of jurisdiction and appellate court affirmed - litigation expenses do not qualify as injury-in-fact, and plaintiff did not show that threat of injury to any of its members was fairly traceable to defendant's determination; plaintiffs also lacked standing).
(veterinarian acquired pregnant, lame mare at auction; foal born 6 weeks later and vet's employee purchased mare and foal out of concern that bet would euthanize mare due to poor health condition; mare recovered at rescue ranch, and vet indicted on single count of cruelty to animals; while court found "ample" evidence of vet's failure to provide necessary food and water to mare, there was little evidence that he failed to care for the foal; ultimately, court determined that there was insufficient evidence to support conviction of animal cruelty under state law).
(court denies plaintiff's petition for class certification; case involves plaintiff's claim that defendant conspired or attempted to conspire to monopolize market for milk in violation of Sherman Act Sec. 2, price fixing in violation of Section 1 of Sherman Act and conspiracy to restrain trade in violation of Sec. 1 of Sherman Act).
(plaintiffs' land bordered wetland with frontage on pond located in town; pond held in trust by New Hampshire for public use; defendant owned property on opposite side of wetlands with pond frontage; defendant installed "beaver pipes" to stabilize pond's water level; discharge of water from pond muddied plaintiffs' property and plaintiffs sued for an unconstitutional taking; issue construed as one for inverse condemnation and rejected - mud was merely annoyance or inconvenience which caused drop in plaintiffs' land values, but did not constitute private nuisance; plaintiffs did not make valid claim for declaratory judgment).
(case involves defendants (rice farmers) alleged damages as a result of plaintiff’s contamination of non-GMO rice with plaintiff’s GMO rice - LibertyLink Rice (LLRice); plaintiff conducted outdoor field tests of LLRice before receiving regulatory approval and, at the time of the tests, no foreign government had authorized commercial use of GMO rice for human consumption; trace amounts of LLRice found in popular varieties of long-grain rice seed and regulatory approval granted three months later; defendants are rice farmers who sued to recover economic damages; vast majority of U.S. long-grain rice exported and major import countries either banned import of U.S. rice or required non-GMO certification or testing; defendants’ complaint alleged negligence and included claim for punitive damages; trial court, at pre-trial hearing, allowed testimony of defendant’s expert, ruled that defendant’s losses not barred by economic loss doctrine and held that state cap on damage award (Ark. Code Ann. Sec. 16-55-206) violated Arkansas Constitution (Art. 5, Sec. 32) and is unconstitutional; at jury trial, court determined on motion that plaintiff did not act intentionally, but again denied plaintiff’s motion that damages barred under economic loss doctrine; jury verdict for defendants and judgment entered, including $42,000,000 in punitive damages against plaintiff; plaintiff moved for new trial; on appeal, court held that state cap on damage awards unconstitutional, economic loss doctrine does not bar claim because damage to other property (lands, crops and equipment) involved, expert testimony properly allowed and question of excessiveness of jury’s award not properly before court).
(two of the top hurricane forecasters (Colorado State University climatologists) announce that they are discontinuing their early December quantitative hurricane forecast because their” early December Atlantic basin seasonal hurricane forecasts of the last 20 years have not shown real-time forecast skill…”; in essence, report notes that forecasters admit that they cannot accurately predict hurricanes; admission casts doubt on “global warming” theory; report accessible at http://hurricane.atmos.colostate.edu).
(plaintiff, former police officer that resigned due to marijuana possession, injured on the job and received Workers’ Compensation benefits; plaintiff later struck cow on road and alleged further injuries to neck and back as a result; court ruled that earlier accident did not establish that on-the-job injuries predisposed plaintiff to injuries sustained in accident with cow; plaintiff sued cow owner for damages along with local Sheriff (mishandling of accident investigation) and local town (failing to put up signs warning that the area where accident occurred was open range); case dismissed).
(Democratic Organization of Cook County (Chicago) denied plaintiff various job applications by engaging in various politically discriminatory hiring practices; City of Chicago paid plaintiff $12,500 in settlement of her claims which plaintiff did not report on her return for year in question; court holds that such amounts are taxable as payment in redress for lost wages (and would be taxable even if they weren't) and did not involve physical sickness or injury; political discrimination award not excludible under Sec. 104(a)).
(plaintiff not entitled to capital gain deduction on sale of farm; material participation test not satisfied; land had been cash-rented and owners’ work on farm consisting of clearing timber, removal of fallen trees and repairing fences not substantiated; work done as investor not considered to be material participation).
(Chapter 13 debtor appealed from denial of plan confirmation for debtor’s failure to include social security benefits in projected disposable income; on appeal, district court held that social security benefits are expressly excluded from the calculation of disposable income; failure to include entire amount of social security benefits from debtor and non-filing spouse does not constitute bad faith; bankruptcy court Order of Dismissal reversed).
(court enjoins mezzanine financier (lender that provides funds to an investor necessary to complete a deal for which regular lending has already been secured and who is typically secured by a second mortgage coupled with interest rate substantially higher than senior lender’s rate and who will be paid back after the senior lender but before the investor gets any money, and where the loan typically doesn’t require any payment during the term of the loan, but accumulates interests that are all paid at the end) from foreclosing on its equity in mortgage borrower after mezzanine lender failure to cure all defaults under senior loan; court follows Bank of America, N.A. v. PSW NYC LLC, 918 N.Y.S.2d 396 (2010)).
(announcement that state will distribute approximately $3 million in dairy tax credits in January of 2012 to dairy farmers; amount results from recalculation of dairy tax credit allowed for 2010 which allows a credit to be claimed when milk price falls below "trigger" price).
(for insurance policies held in trust where the grantor has retained a power that can be exercised in a non-fiduciary capacity to acquire the policy by substituting assets of equal value, the exercise of the power will not cause the policy value to be included in the grantor's gross estate under I.R.C. Sec. 2042).
(fence at issue constructed in 1947 that separated two parcels containing hogs; fence maintained in same location until 1973; defendant purchased one parcel in 1973 at which time survey conducted which revealed that fence not on surveyed land; plaintiff later purchased tract and objected to fence being several feet on plaintiff’s surveyed side of fence; court determined that defendant had obtained title to disputed strip under doctrine of practical location; prior owners had agreed to treat fence as boundary and it had been treated as such for at least 15 years as required by statute).
(defendant diverted water for wildlife protection purposes (endangered steelhead trout) and such action had been ruled in prior court opinion (543 F.3d 1276 (Fed. Cir. 2008)) to constitute compensable physical taking rather than a regulatory taking; plaintiff, and not state of California, owned water at issue and water not merely regulated, but court ruled that plaintiff had to pay for installation of fish ladder as part of operational and maintenance costs of running the diversion in accordance with prior contract; water right estimated to be worth $80 million; in present action, court determined that only compensable water right obtainable under California law is right to beneficial use and that defendant cannot use taking defense of Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) because defendant did not show that restriction on water used imposed on plaintiff under the Endangered Species Act duplicated the same outcome achievable under state law; but, court held that plaintiff's taking claim not ripe until defendant's action interferes with plaintiff's beneficial use of water).
(petitioner received $82,500 (including $3,674.24 for legal expenses and $35,471.59 for legal fees) from settlement of lawsuit tied to her resigning job at care center due to unpleasant work environment and her claimed damages for "loss of self-esteem, humiliation, emotional distress, mental anguish and pain and related compensatory damages"; petitioner did not suffer any physical injuries; petitioner's lawyers informed her that payment for non-physical injuries generally taxable, but that law unsettled; lawyers referred petitioner to court case that held that emotional damages not always taxable, but failed to refer her to subsequent opinion issued in same case after first opinion vacated which held that emotional distress award taxable; lawyers informed petitioner to seek tax advice; petitioner received Form 1099-Miscellaneous and took her taxes to Jackson Hewitt who never answered the question as to whether award taxable; petitioner called another tax preparer at 47th and Troost who told petitioner that award not taxable; petitioner then advised by Jarods Accounting Services who prepared return omitting settlement income; petitioner also received wages for caretaking but did not report those wages because no Form W-2 received; court held that settlement and wage income taxable; petitioner not liable for accuracy-related penalty).
(trial court properly dismissed state's charge against defendant of cruelty to animals for killing neighbor's dog in defendant's backyard; dog killed in act of charging at defendant; dog-kill statute does not require that the defendant must have reasonably believed that use of force necessary to defend one's self against attack; no evidence presented that threat to defendant was imaginary, unrealistic or otherwise did not exist so no fact question presented for jury).
(potato farmers not exempt from Sherman Antitrust Act; conduct involved acreage reductions, production restrictions and collusive crop planning and is not exempted from antitrust scrutiny by the Capper-Volstead Act which exempts farmer cooperatives from some federal antitrust provisions; case involves request for class action status by wholesale potato buyers and consumers against United Potato Growers of America (a national farmers' cooperative consisting of 10 state and regional cooperatives; court refused to dismiss lawsuit stating that court needs to conduct "a factually-intense inquiry" about the role of integrated farmer-packers in the cooperative).
(debtor filed Chapter 12 petition; case converted to Chapter 11 and then Chapter 7; debtor asserts wrongful termination of Sow Contract Grower Agreement, and breach and anticipatory repudiation of Nursery Contract Grower Agreement as well as breach and anticipatory repudiation of unwritten lease of pig finishing floor space at debtor’s farming operation; defendants moved to compel arbitration which court dismissed; court initially held that debtor’s claims for post-petition breach of pre-petition Nursery Agreement and Finishing Agreement were “core” proceedings under 28 U.S.C. Sec. 157(b)(2) and, as a result, arbitration clause in Nursery agreement was unenforceable; court also determined that enforcing arbitration provision in Sow Agreement was inappropriate because it would be counter to Chapter 11’s goal of rehabilitating debtor; in this opinion, court holds that debtor’s claims are non-core, but are related to underlying bankruptcy case and that court can hear claims and submit proposed findings of fact and conclusions of law to district court on unwritten finishing agreement; Nursery Agreement and Sow Agreement contain arbitration provisions and must be submitted to arbitration; further proceedings stayed pending conclusion of arbitration).
(IRS has no authority to assert an excessive claim penalty under I.R.C. §6675 for credits claimed on Forms 4136, 6478 or 8864; specific mention made of federal tax paid on fuels which is claimed on Form 4136).
(state of Ohio widened spillway on Grand Lake St. Marys from 39 feet to 500 feet in 1997 which caused significant increase in frequency, severity and duration of flooding of downstream properties; landowners sought damages for taking by flooding; claim not barred by four-year statute of limitations because defendant's ongoing control barred statute of limitations from running; landowners sufficiently established that flooding occurred on their property was direct, natural or probable result of defendant's actions and constituted a taking under Art. I, Sec. 19 of Ohio Constitution; court ordered defendant to start appropriation proceedings to determine amount of taking).
(state of Ohio widened spillway on Grand Lake St. Marys from 39 feet to 500 feet in 1997 which caused significant increase in frequency, severity and duration of flooding of downstream properties; landowners sought damages for taking by flooding; claim not barred by four-year statute of limitations because defendant's ongoing control barred statute of limitations from running; landowners sufficiently established that flooding occurred on their property was direct, natural or probable result of defendant's actions and constituted a taking under Art. I, Sec. 19 of Ohio Constitution; court ordered defendant to start appropriation proceedings to determine amount of taking).
(case involves son lawsuit against parents for constructive trust based on alleged promise by father that farm would be gifted to son upon father’s retirement in return for son’s labor in lieu of regular pay; son worked on farm for 26 years before bringing suit; trial court granted summary judgment for father and dismissed case; on appeal, court reversed; elements of constructive trust are (1) confidential or fiduciary relationship; (2) promise; (3) transfer in reliance on promise; and (4) unjust enrichment; while parents presented sufficient evidence to shift burden to son to establish triable issue of fact on each element of constructive trust (such as son choosing to work on farm after high school graduate of own free will, receipt of several vehicles, rent-free use of farm property for son’s fertilizer spraying business and son’s retention of crop profits), son established that he worked long hours without regular pay, obtained necessary environmental permits and licenses and made substantial financial contributions in furtherance of farm business; confidential relationship present; requirement of transfer satisfied where son has no prior interest in farm, but does contribute funds, time or effort to property in reliance on promise to receive an interest in the subject property; factual questions remain on issue of unjust enrichment of parents).
(taxpayer’s gross receipts derived from sale of leasehold rights in natural gas properties do not constitute DPGR under I.R.C. Sec. 199(c)(4)(A)(ii); leasehold rights not part of well (real property) that taxpayer constructed; any gross receipts attributable to unsevered oil, natural gas and minerals relate to the leasehold rights and not to the well; qualifying disposition of natural gas only occurs after taxpayer produces natural gas).
(IRS granted waiver from 60-day rollover requirement for taxpayer’s withdrawal of funds from IRA that weren’t rolled over into another IRA; taxpayer deeply involved in caring for spouse and event beyond taxpayer’s reasonable control; taxpayer’s mental and emotional condition impacted by spouse’s condition; taxpayer presented sufficient documentation to show impacts of spouse’s condition on taxpayer).